the week ahead for major stock indices 10 oct to 14 oct holding above supports as u s q3 earnings se

S&P 500 – Imminent potential bullish breakout to retest all-time high

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Key Levels (1 to 3 weeks)

Intermediate support: 2149/46

Pivot (key support): 2135

Resistances: 2174 & 2194

Next supports: 2110/100 (downside trigger) & 1991

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has continued to trade within a sideways fashion since its 22 September 2016 minor swing high of 2180 and held above the predefined 2135 medium-term pivotal support. Please click here for a recap on our previous weekly technical outlook/strategy. Key elements as follow:

• The current two weeks of sideways trading environment seen in the Index has been  accompanied lower volatility as seen from the 4 hour Bollinger Bandwidth that has continued to narrow to an “extreme” low level last seen in early August 2016. These observation represents “volatility compression” and it is likely that that a breakout of price action from its current minor symmetrical triangle range (depicted in dotted pink) of 2167 and 2146 is imminent (see 4 hour chart)
• The growth oriented/high beta benchmark Nasdaq 100 has continued to outperform the S&P 500 and based on last Friday, 07 October 2016 closing level of 4864, it is only 0.6% away from its current all-time high of 4895 printed recently on 22 September 2016. In addition, our basket of high-beta stocks (momentum & consumer discretionary focus) has continued to outperform its defensive counterparts since 27 September 2016. These observations suggest that risk appetite behaviour has not receded despite the recent hawkish comments from some Fed officials on interest rate policy (refer to the last two charts).
• The key medium-term resistance now stands at 2194 which is defined by a confluence of elements; the current all-time high, the range top in place in since mid- August 2016 and the 0.764 Fibonacci projection of the up move from 12 September 2016 low of 2108.

Imminent potential bullish breakout from range and any potential dip in price action of the Index is likely to be held by the 2149/46 intermediate support for a potential push up to retest 2174 before the current all-time high of 2194.  

On the other hand, a break below the 2135 medium-term pivotal support is likely to see another round of the choppy decline towards the significant pull-back support of 2110/100.

Nikkei 225 – Potential push up within sideways range configuration

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Key Levels (1 to 3 weeks)

Intermediate support: 16600

Pivot (key support): 16340

Resistances: 17165 & 17500/700

Next support: 15830

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) has continued to trade sideways above the medium-term pivotal support of 16340 and it is also being supported by a medium-term ascending trendline in place since 24 June 2016 low (Brexit) now at 16600.

No major change in technical elements and the USD/JPY has managed to hold above its medium-term pivotal support of 102.40 after last Friday, 07 October U.S. nonfarm payrolls data release for September came in below expectations (156K versus 175K) and its technical elements are still advocating for at least a potential push up to retest its minor swing high of 104.30.

Therefore based on intermarket cross asset analysis, the positive elements seen on the USD/JPY are supporting a further potential up move on the Nikkei 225. As long as the 16340 medium-term pivotal support holds, the Index is likely to see a push up to retest the 17165 intermediate range top in place since 31 May 2016.  Only a break above 17165 may open up scope for a futher rally to target the key long-term resistance zone at 17500/700 (neckline of the bullish “basing” formation, descending trendline in place since 21 June 2016 high and a Fibonacci cluster).

However, failure to hold above the 16340 medium-term pivotal support is likely to invalidate the preferred push up scenario for a deeper decline towards the next support at 15830 (former medium-term swing high areas of 30 June/04 July 2016 & close to the  61.8% Fibonacci retracement of the up move from 24 June 2016 low to 02 September 2016 high).

Hang Seng Index – Further potential upside after bullish breakout from range

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Key Levels (1 to 3 weeks)

Intermediate support: 23700/600

Pivot (key support): 23000

Resistances: 24500 & 25400

Next support: 21650/380

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has managed to stage the expected bullish breakout from its minor “symmetrical triangle” range configuration in place since the 09 September 2016 high of 24406.

No major changes in technical elements and with the intermediate support now set at 23700/600 (the pull-back of the recent “symmetrical triangle” bullish breakout), the Index is likely to see a further push up towards the resistances at 24500 and 25400.

On the other hand, a break below the 23000 medium-term pivotal support is likely to invalidate the preferred bullish scenario for a deeper decline towards the next support at 21650/380 (the pull-back support zone of the former “symmetrical triangle range” bullish breakout & close to the 61.8% Fibonacci retracement of the current up move from 24 June 2016 low to 09 September 2016 high of 24406).

ASX 200 – 5436 needs to be broken down to revive potential bears

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 5500/5520

Supports: 5436 (downside trigger), 5360 & 5320/300

Next resistance: 5580/5610

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) has staged the expected bearish breakout from the “Ascending Wedge” configuration (depicted in pink on the 4 hour chart) but failed to break below the intermediate support of 5436.

In addition, the daily (medium-term) RSI oscillator is still holding above the 50 % level which suggests that downside momentum of price action has not surfaced yet.

Therefore, our bearish conviction has been reduced unless we start to see a break below 5436 in order to trigger a potential corrective decline towards next support 5360 before another upleg cycle materialises.

DAX- 10420/230 remains the support to watch for a potential recovery

Deutsche Bank AG

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Key Levels (1 to 3 weeks)

Intermediate support: 10420

Pivot (key support): 10230

Resistances: 10700 & 10990/11190

Next support: 9760

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has traded in a sideways fashion with a tight range of 1.84% after it printed a high of 10647 on last Tuesday, 04 October 2016. Last week’s positive enthusiasm in price action of the Index seen at the start of the week was being reinforced by the potential reduction of the US$14 billion fine imposed on Deutsche Bank by the U.S. Department of Justice.

Over the weekend, there were media reports that reported that the management of Deutsche Bank had not reached an agreement to reduce the US$14  billion fine over mis-selling of mortgage-backed securities and talks are expected to continue over the course of this week with officials from the U.S. Department of Justice.

The movement of Deutsche Bank’s share price is likely to cast a shadow and influence the movement of DAX in the short to medium-term. From a technical analysis perspective, the Deutsche Bank’s share price has continued to hold above a key support level of EUR10.00 and elements are still supportive of a potential “relief rally”.

Therefore, as long as the 10230 medium-term pivotal support holds on the Germany 30 Index, it is likely to see a potential push up to retest the “Expanding Wedge” range top at 10700 before targeting the next resistance at 10990/11190.

On the other hand, a break below the 10380 medium-term pivotal support is likely to invalidate the preferred recovery scenario for a deeper decline towards the next support at 9760 (former medium-term swing high area of 30 June/04 July 2016 & 61.8% Fibonacci retracement of the entire up move from 24 June 2016 low to 15 August 2016 high).

Charts are from City Index Advantage TraderPro & eSignal

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